Sikora v. Sikora Estate

One of the most challenging aspects of my estate-planning practice is assisting married clients with children previous relationships or marriages. The problem for the client in a second (or third) marriage is how to balance the competing interests of his spouse and his children. When a reasonable balance is not achieved, the result may be litigation between the children and the spouse.

Peter Sikora died on December 20, 2004. He had a widow, San Sikora. They had been married for over 18 years, and lived together for about five years before their marriage. He also had a child from a previous marriage, Richard Arthur, and three sons from a previous common-law relationship, David Sikora, Douglas Sikora and Donald Sikora.

When he made his will on August 16, 1986, Peter Sikora owned a house in Ashcroft, in which he and his wife lived, and a rental property in Delta, B.C. He also owned a small business, buying and selling electronic parts.

In his will, he appointed his wife and his son Donald as his executors. He left his wife his house in Ashcroft (the title to which he held in his sole name), his furnishing and his car. He left $500 to his son Richard. He left the residue of his estate to his other three children.

He later sold his rental property in Delta, and used some of the proceeds to pay off his mortgage on his house in Ashcroft. He also wound up his business.

At his death, most of the value of his estate was comprised of the house at Ashcroft. It now has a property tax assessed value of just under $570,000. After deducting his debts, funeral expenses, executor fees, legal and probate fees, there was only about $11,500 to be divided among the three children entitled to the residue of Peter Sikora’s estate.

Two of Peter Sikora’s children, David and Douglas, brought an application to vary Peter Sikora’s will under the Wills Variation Act. In British Columbia, spouses and children may apply to vary a will if their deceased spouses or parents (as the case may be) have not made adequate provision for them. The Supreme Court of British Columbia may then make such provision as the Court decides is just, adequate and equitable in the circumstances.

Both children testified that their father was an alcoholic and abusive to them and their mother when they were growing up. They continued to have a relationship with him until his death.

Douglas Sikora is 43 and has his own construction contracting business. His income is about $95,000 per year. He owns his home, but has a mortgage. The total net value of his assets is about $284,000. He has a son.

David Sikora is 47, and works as a general contractor. He expects a loss in 2008, and had income of about $36,500 the previous year. He owns his home, but has no equity in it. The net value of his assets is about $81,000. He supports his daughter.

San and Peter Sikora kept title to their assets separate. Peter Sikora used his own funds to buy the house in Ashcroft, and paid property tax, insurance, and other expenses for the house.

Apart from her interest in her husband’s estate, San Sikora has assets in Canada with a net value of approximately $1,273,000 as well as an interest in property in Taiwan. She is 62 years old, and has an income of about $50,000 a year. She lives in the house in Ashcroft with her adult son.

In his reasons for judgment released yesterday, in Sikora v. Sikora Estate, 2009 BCSC 195, Mr. Justice Cullen balance the competing principles of respecting Peter Sikora’s testamentary intentions and giving effect to Peter Sikora’s moral obligations to Douglas and David to make provision for them. He considered the fact that San Sikora had built up her own estate, which she wished to leave on her death to her own son from a previous marriage. He also considered the financial resources of both David and Douglas, and their obligations to support their minor children.

Mr. Justice Cullen also considered the fact when Peter Sikora made his will, he had more assets that would form the residue of his estate, and go to three of his children. Mr. Justice Cullen inferred that Peter Sikora did intend to make greater provision for his children than what they would receive under his will given the change in his assets between when Peter Sikora made his will and his death.

The Court varied the will by giving title to the house in Ashcroft to Douglas Sikora and David Sikora, subject to a life interest in favour of San Sikora. Douglas and David Sikora would be required to pay the property insurance premiums and for any major repairs during San Sikora’s lifetime. San Sikora, in turn, would pay the property taxes and costs of minor repairs. The effect of this order is that San Sikora will have the benefit of the house during her lifetime, but on her death, Douglas and David will receive the house, rather than San Sikora’s own son.

Witness Immunity from Civil Suits

In British Columbia, witnesses giving evidence in court cases and other legal proceedings enjoy a broad immunity from lawsuits against them for defamation based on their evidence. This immunity extends to conversations between a witness and a lawyer when the lawyer interviews the witness to obtain information related to a court case.

If witnesses were not given immunity from claims, there is a risk that some witnesses would be afraid to talk to lawyer representing those involved in a lawsuit or to give evidence at a trial. A witness might fear that one of the people involved in a lawsuit might sue them. If witnesses are discouraged from cooperating with lawyers or giving evidence, then the result will be that judges making decisions will not have the benefit of crucial evidence. The search for the truth will be hampered.

The witness (or potential witness) does not have to come forward with evidence from the purest of motives. The immunity still applies.

The British Columbia Court of Appeal recently considered witness immunity in McDaniel v. McDaniel, 2009 BCCA 53.

Brian McDaniel was suing his disability insurer in British Columbia relating to his disability benefits. He was also in a lawsuit in Washington State against his brother Jack McDaniel concerning a trust.

In McDaniel v. McDaniel, Brian McDaniel alleged that his brother Jack McDaniel spoke with the disability insurance company’s lawyer, Jo Ann Carmichael, at lease six times. According to Brian McDaniel’s allegations, Jack McDaniel told Ms. Carmichael that Brian McDaniel had been dishonest in his disability claim, and that he, Brian, continued to work as a real estate agent.

Brian McDaniel sued his brother Jack as well as the lawyer, and her law firm. He alleged that Jack McDaniel had defamed him, interfered with his contractual relations with the disability insurer, and that Jack McDaniel and the insurance company’s lawyer unlawfully conspired against him and intentionally inflicted emotional distress.

Jack McDaniel, Ms. Carmichael and her law firm brought motions under Rules 19(24) and 18(6) early in the suit, seeking to have the claims struck on the basis that Brian McDaniel did not have valid claims.

In the Supreme Court of British Columbia, at 2008 BCSC 653, Mr. Justice Groberman stuck the claims against Ms. Carmichael and her law firm, but declined to dismiss the claim against Jack McDaniel. He found that there was no valid claim against the lawyer who was acting within the scope of her duties as the insurance company’s lawyer in respect of the disability claim. The claim against her and her firm had no chance of success at a trial. But Mr. Justice Groberman said he was unable to determine based on the material before him whether the information given by Jack McDaniel to Ms. Carmichael was connected to the possibility that he would be a witness in court. This means that Brian McDaniel would have the chance to prove his claim at trial against his brother, but not against the insurance company’s lawyers.

Brian McDaniel appealed the decision to strike his claim against the lawyer, and Jack McDaniel appealed Mr. Justice Groberman’s decision to allow Brian McDaniel’s claim against him to proceed.

Mr. Justice Bauman for the Court of Appeal upheld the decision dismissing Brian McDaniel’s claim against Ms. Carmichael and her firm. The Court of Appeal also allowed Jack McDaniel’s appeal, and dismissed his brother’s claim against him.

He held that the witness immunity includes in-court statements, and out-of-court statements made to professionals preparing the evidence for court. It protects witnesses irrespective of their motives in making the statement.

Mr. Justice Bauman also held that it was appropriate to strike out a claim where witness immunity applies early in the process. He wrote at paragraph 43:

But for the privilege of witness immunity to function properly, it is critical that one be able to invoke it early in the proceedings before significant irrecoverable costs are incurred. Such actions, if the immunity is properly available, should be "throttled at the birth" in the words of the editors of George Spencer Bower, A Code of the Law of Actionable Defamation, 2nd ed. (London: Butterworth, 1923) at p. 346. In the case before us, the evils of proceeding against the insurer's lawyer and a potential witness are quite evident. The proceeding seriously compromises the lawyer's ability to act in the insurance litigation and she is hamstrung as well by solicitor/client privilege in defending herself in this proceeding.

Quallie v. Vandervelde

On April 30, 2005, Gretha Vandervelde went to the hospital after a fall. When she went to the hospital she was confused and agitated. Her clinical records indicate that she suffered from dementia and delirium. On May 2, 2005, she took a Mini Mental Status Exam and scored 16 out of 30, not a good score. This was her second fall in ten days. She also had terminal cancer in her lungs and brain.

On May 4, she signed a transfer of her house into a joint tenancy with two of her daughters, the effect of which was that on her death over 5 months later, the title to her house went to two of her daughters, to the exclusion of her other daughter, Betty Quallie.

After her mother’s death, Ms. Quallie sued her sisters. Ms. Quallie alleged that her mother did not have the mental capacity to transfer the house into a joint tenancy with Ms. Quallie’s sisters.

Although her mother named her as a beneficiary of her will, she was effectively disinherited. In addition to transferring the house into the joint tenancy, her mother transferred funds into joint bank accounts with her sisters, and named them as beneficiaries of her Registered Retirement Income Funds. Although Ms. Quallie was named as a beneficiary in her mother’s will, if these transactions were upheld, there would be nothing in the estate to flow to Ms. Quallie under the will.

From the facts I have recited—as you will see, I have not told the whole story—it would appear doubtful that Ms. Quallie could have had the capacity to transfer the house. Yet, Mr. Justice Macaulay, in Quallie v. Vandervelde, 2009 BCSC 5, found that she did have capacity and upheld the transfer.

At the time of the transfer, Ms. Quallie and her mother were not on good terms. After the death of Ms. Quallie’s father (which appears to have been earlier in 2005), her mother became angry at her. There had been other periods of estrangement, but each time Ms. Quallie and her mother made up. Sadly, on this occasion, they never spoke again.

In February 2005, Gretha Vandervelde spoke with her financial adviser, who asked her about her estate planning. She told him that she did not want her assets to go to Ms. Quallie. He suggested setting up joint accounts with her other daughters, and naming them as beneficiaries of her Registered Retirement Income Funds. She did so.

She met with a lawyer, Stephen Miller, in March, 2005. Two of her daughters were present part of the time, but Mr. Miller also met alone with Ms. Vandervelde. She was able to describe the nature of her assets and was fully lucid. He was aware that she had brain cancer and paid close attention to her capacity. He was satisfied she had capacity to change her estate plan, and that her daughters were not unduly influencing her. After he discussed her options for disinheriting Ms. Quallie, she said she would consider them.

Mr. Miller saw Mrs. Vandervelde again in the hospital on May 3, 2005, for her to sign a power of attorney. She told him again that she wanted to exclude Ms. Quallie, and explained her reasons. He believed that she had capacity to transfer her house.

Mr. Miller then prepared the transfer of Ms. Quallie’s house into a joint tenancy with two of her daughters so that the house would bypass her estate and flow to the two daughters by right of survivorship.

On each visit, he met alone with Ms. Quallie. When the two benefitting daughters returned to the room, they tried to talk their mother out of disinheriting their sister, but she was firm.

Mr. Justice Macaulay held that the degree of understanding required of Mrs. Vandervelde for her to have capacity to transfer the house into a joint tenancy was as high as the capacity to make a will. She would need to:

1. Understand what she was doing;
2. Comprehend and recollect what property she had; and
3. Remember the persons she might expect to benefit.

In this case, Mr. Justice Macaulay found that Mrs. Vandervelde did understand what she was doing, knew her assets, and whom she might expect to benefit. The evidence of the financial planner, Mr. Miller, and her treating physician (which I will get to shortly), supported the defendants position that their mother had capacity. Mr. Justice Macaulay upheld the transfer of the house into a joint tenancy.

What about the evidence of confusion, dementia and delirium?

Her physician, Dr. Killick, gave evidence that he had prescribed narcotics on April 20, 2005 to Ms. Quallie for her arthritis. There was also evidence that she had been given morphine for pain from the falls. The medication likely caused her mental symptoms, from which she recovered as her medication was reduced. On May 3, the nurses’ notes indicate that she was aware of time place and person.

Mrs. Vandervelde’s previous physician, Dr. Goldberger gave evidence that the low Mini Mental Status Exam score could have been caused by the effects of the drugs, and that the effects would be temporary, followed by quick improvement as the levels were reduced.

Mr. Justice Macaulay found that by May 4, 2004, Mrs. Vandervelde had returned to full mental capacity.

Costs Award in Brydon v. Malamas

This post is a postscript to my post on Brydon v. Malamas, 2008 BCSC 749, a case in which the Supreme Court of British Columbia pronounced against a will made by Stella Sirgianidis. Mr. Justice Halfyard found that she did not have the mental capacity to make the will. The court also set aside a transfer of her land, of two bank accounts and of a beneficiary designation of her Registered Retirement Savings Plans.

After the decision, the parties were then given the opportunity to argue who should receive the court costs.

The usual rule in British Columbia is that court costs follow the event. This means that if you win a lawsuit, the losing party has to pay you some costs toward your legal expenses. Usually the costs awards do not fully indemnify the successful party, but they sure help.

Like many rules, there are exceptions. In disputes about estates, the courts sometimes allow unsuccessful parties their costs out of the estate, occasionally on a full indemnity basis. If the court determines that the lawsuit was in some sense caused by the deceased or by his or her conduct, then the court may allow all of the parties their costs. For example, if the will is poorly drafted causing ambiguities that the court must interpret, the court may exercise its discretion to award costs out of the estate even to the unsuccessful parties. The lawsuit can be said to be caused by the deceased, rather than those who end up in court.

There is a further principle that an executor or administrator is usually entitled to be reimbursed for his or her legal expenses related to the administration of the estate, including legal expenses in lawsuits.

In Brydon, one of the defendants, Jimmy Malamas, was named as an executor in the disputed will. He was also a beneficiary in the disputed will, and he would have benefited from the disputed transfers of the bank accounts and from the designation in the Registered Retirement Savings Plan if those transactions had been upheld.

Mr. Malamas, and the other defendant, Mary Malamas, argued that all parties should receive their costs on a special cost basis (which may fully indemnify the parties for their legal costs). They argued that the litigation was caused by the deceased’s conduct. She made the will and performed the transactions at a time when she was incapacitated.

Furthermore, as the named executor, Jimmy Malamas, argued that it was reasonable for him to bring the application to prove the validity of the disputed will. He argued that he should be fully indemnified as the named executor.

The plaintiff, on the other hand, sought her costs against the defendants personally, and opposed the payment of costs to the defendants out of the estate. She argued that the case did not fall into either of the exceptions cited by the defendants to the normal rule that costs follow the event.

In Brydon v. Malamas, 2009 BCSC 80, Mr. Justice Halfyard agreed with the plaintiff. He found that the defendants were acting in the lawsuit to protect their own interests as beneficiaries of the disputed will and the other disputed transactions. The lawsuit was in the nature of an adversarial contest among beneficiaries. He found that the defendants were involved in some of the suspicious circumstances concerning the making of the will and of the transactions. He also found that they were reckless as to Stella Sirgianidis’ mental capacity.

In the result, the defendants are required to pay the plaintiff’s costs, and are not entitled to any costs out of the estate.

James L. Watson Courthouse, New York

My son Justin took this picture last summer of the James L. Watson Courthouse, seat of the United States Court of International Trade.